The Web3 Foundation announces that the native token of Polkadot Blockchain (DOT) has transformed and is now software. The Web3 Foundation announces an important step towards the realization of Web 3.0. A decentralized Internet, without a trusted third party and without a server. The native blockchain Polkadot (DOT) token, originally offered, sold and delivered to buyers as a security, has evolved and is no longer a security. It is now software.
The regulatory context for the Web3 Foundation
This announcement marks the third anniversary of the Web3 Foundation’s first engagement with the US Securities and Exchange Commission’s (“SEC”) Strategic Hub for Financial Innovation (“FinHub”). In November 2019, the regulatory climate for digital assets was tense. When the Web3 Foundation approached FinHub, the SEC had recently filed its lawsuit against Telegram. Additionally, FinHub staff’s Digital Assets “Investment Contract” Analysis Framework (the “Framework”) had been released only a few months earlier. In the aftermath, numerous other enforcement actions and announcements from the SEC were unveiled. Examples include his Investigation Report 21A: The DAO (“the DAO Report”), the Munchee Cease and Desist Order, and the Kik Decision.
Daniel Schoenberger is the legal director of the Web3 Foundation. He said The Framework suggests that almost all digital assets offered and sold for fundraising purposes, initially, were likely to constitute security when delivered to initial buyers. Yet the Framework also contains another way forward. This would make it possible to subsequently revalue a digital asset initially offered and sold as a security. For purposes of US federal securities laws, it may no longer be a security.
Relations between the Web3 Foundation and the SEC
The Web3 Foundation funds research and development teams that build the decentralized web technology stack, with the official mission of advancing the vision of Web 3.0.
Over the next three years, the Web3 Foundation met with the SEC on a regular basis. It has attempted to innovate and comply with US federal securities laws. This compliance work focused in particular on the offer, sale, marketing and delivery to first buyers as securities.
According to the Web3 Foundation, current DOT offers and sales are not corporate actions. The use of DAT remains for the purposes for which it was designed, namely, among other things, to offer and secure parachains and to facilitate on-chain governance. Control of the Polkadot network has long been in the hands of DOT holders. According to Mr. Schoenönberger, the DOT is not a title. It’s software.
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